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‘Sky high’ opportunities for SES/GOGO

On February 26th satellite operator SES will unveil its latest results but earlier this week it announced it had entered into a major capacity agreement with In Flight Entertainment (IFE) specialists GOGO. The deal guarantees bandwidth over the Americas with dedicated beams for IFE use on SES-14 and SES-15, and using SES-12 which covers Asia, the Mid-East, North Africa and Russia.

GOGO says the deal is the largest-ever such single agreement for aircraft connectivity, and equity analysts at investment bank Berenberg say that it is larger than a $290 million deal for similar capacity signed with GOGO rival Global Eagle Entertainment (GEE) back in 2012. Since then GEE has doubled its bandwidth with SES via a top-up agreement inked last October.

Berenberg state: “Together, these three [SES] satellites offer spot-beam capacity amounting to 250 transponder equivalents: a massive increase in capacity coming at very low incremental cost, given that they are ancillary payloads on wide-beam satellites. Of course, this will not affect the 2016 growth rate, and 2017 will see only a partial benefit. However, it certainly gives an indication of the potential for strong growth in the aeronautical segment, which we do not think the market has recognised in relation to SES.”

The bank’s note to clients continues: “A final point we would make in regard to SES is that this deal is interesting in that it involves the lease of both spot-beam and wide-beam capacity. GOGO intends to combine live television (wide-beam) with internet/streaming video (spot-beam). We saw something similar with the Panasonic/Intelsat and Eutelsat/Panasonic deals [for IFE capacity], and these suggest that the fixed satellite service (FSS) players will be at an advantage to the likes of Inmarsat. SES management has long argued that the ability to combine spot beam with wide beam will be to its advantage: this seems to be playing out.”

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